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China's Rebalancing Drive to Affect World Economy
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China's economic remodeling attempt after years of "unrivalled" accomplishments in its development may produce great impact on the world economy, a prestigious economist has said here at an on-going Asian-oriented forum.

The structural rebalancing will provide greater stability to the Chinese economy and "could have profound implications" for the global economy and world financial markets, said Stephen S. Roach, chief economist with Morgan Stanley, at the annual meetings of the Boao Forum for Asia (BFA) in this scenic town of China's southernmost province of Hainan.

Delivering a speech titled "China's Rebalancing Challenge", Roach pointed out that a mid-course correction in China's development model is in the offing, that is to shift away from export and investment-powered growth to more of a consumer-driven dynamic.
He noted that China's economy has been too reliant on exports and fixed investment. Years of rapid export growth have already led to serious trade frictions and heightened risks of trade protectionism.

Moreover, a continuation of soaring investment growth could result in excess production capacity and deflation, periodic bottlenecks in the supply chain of strategic materials, serious environmental degradation, and work safety problems.

The economist hailed China's just-enacted 11th five-year plan (2006-2010), saying it underlined three key aspects of the economic rebalancing.

The new national blueprint on economic and social development underscored the moderation of GDP growth objective, which should be viewed as "an effort to raise the quality of economy" rather than a "worrisome shortfall", the adjustment of the makeup of GDP growth, and the financial reforms, he told participants present at the conference.

The foreseeable slowdown of Chinese industrial activities in accordance with the five-year plan means less risks to commodity inflation in the industrial materials markets. And another goal to reduce energy consumption per unit by 20 percent could lead to lower prices of oil and refined products, Roach predicted.

China's pro-consumption initiatives will also boost Chinese import demand, reducing its trade surplus and thereby providing support for its major Asian trading partners such as Japan, Taiwan, and the Republic of Korea, and alleviating the tightened relations with the United States and European Union in currency and trade issues.

Chinese consumers' rapidly growing demands of soft- and hard-goods might provide great business opportunities for the world economy in the 21st century, according to Roach.

The BFA, officially launched in 2001, has been serving as a platform for Asian decision-makers in governments and business circles to exchange views and have in-depth understanding of many critical issues.

(Xinhua News Agency April 23, 2006)

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